Question

The depreciation deduction for year 9 of an asset with a 20-year useful life is $3,400. If the salvage value of the asset was estimated to be zero and straight line depreciation was used to calculate the depreciation deduction for year 9, what was the initial cost of the asset?

Answer 1

Calculation of Depreciation Using Straight line Method

In Straight line method value of assets reduced uniformly for each period until it reaches its salvage value.

Formla for Calculation of Straight line Depreciation Method

Annual Depreciation = (Cost of Assets - Salvage Value) / Useful life of the Assets

Here Useful Life of the Asset = 20 Years

Salvage Value = 0

Depreciation Cost at the 9th Year = $ 3400

3400 = (Cost of Assets - 0) / 20

Cost of Assets = 3400*20

= 68000